The Impact of Declining—and Uncertain—Defense Expenditures in Wisconsin

We read the news coming out of the nation’s capital regarding the “big picture” impact of sequestration and declining defense expenditures. Some of this decrease in military spending is being brought about as a consequence of mandated cuts from sequestration, while a portion is attributable to “good news” in the form of the wind down in active military operations in the Afghanistan and Iraqi theaters. The bottom line is that there has been a significant decline in military acquisition over the past few fiscal years, with more to come in FY2014 and beyond. With tens of billions of dollars in defense cuts and discontinued military programs, the impact is being felt all across the country.

A recently-issued report shows the impact these acquisition cuts are having on large and small businesses in one state: Wisconsin. The Milwaukee-based Wisconsin Procurement Institute (WPI), a non-profit organization that helps businesses with federal contracting, found that in the most recent fiscal year, federal spending in Wisconsin fell by almost a quarter, from $3.98 billion in fiscal 2012 to $3.02 billion in FY2013. The impact of this loss of federal contracting dollars has taken a particularly hard toll on small businesses in the state. This impact can be quantified in the fact that the WPI reported that there had been a 20% decline in the number of active federal contractors in Wisconsin over the past fiscal year.

What has been found in Wisconsin is just a microcosm of what has been occurring across the country. Indeed, the negative impact of declining federal acquisition spending in that state may be far less than in many others, as Wisconsin current ranks just 29th in the country in federal contracting spending. However, the sad reality is that many small businesses will have to close or dramatically reduce their operations—and their employment—to cope with their loss of federal contracting opportunities.